Big bank stake for bondholders

Market sources forecast that debt investors will take up shares in the troubled lender rather than accepting the cash deal on offer

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ondholders in Bank of Ireland could end up with a stake of up to 27% in the lender depending on how many opt for shares instead of cash as part of a debt buy-back scheme announced last week.

The bondholder stake could, depending on demand, be equal to that owned by the government.

Bank of Ireland is offering subordinated bondholders, owed €2.6 billion, the option of exchanging their bonds for cash or shares.

Senior subordinated bondholders are being offered 20 cents in the euro in cash or the equivalent of 40 cents in new Bank of Ireland shares. Junior debtholders are being offered 10 cents in cash or 20 cents in shares per €1 of debt held.

The bank will this week announce the formula for the strike price — the price at which the debt can be converted into shares. The bank shares closed the week just over 14 cents